What price ecosystem services?

The IPCC’s Working Group II report published in March this year gave centre stage to the impacts of climate change on health, food production and labour productivity.

In contrast, the potential loss of ecosystem services was largely ignored.

The importance of the ecosystem services cannot be overstated.

We are dependent on the services provided for us by multiple species for food, water, oxygen, flood protection, medicines, and building materials among many other things. All of these services are provided free of economic cost.

One of the reasons given why the ecosystem is sometimes not considered in policy decisions is because it doesn’t appear to have a monetary value. This climate snack will discuss whether placing economic value on biodiversity can provide a further impetus to act on climate change.

Quantifying ecosystem services

In 1997, Robert Costanza and colleagues estimated that the Earth’s ecosystem services provided $33 trillion of value per year [1].

Since then a series of organisations and initiatives – such as the Millennium Ecosystem Assessment, The Economics of Ecosystems and Biodiversity initiative (TEEB) and the World Bank’s Wealth Accounting and the Valuation of Ecosystem Services (WAVES) – have conducted similar projects.

The first TEEB report, for example, was published in 2008 and estimated that the amount of biodiversity lost annually is equivalent to $2-6 trillion of ecosystem service value [2].

By looking at the value of individual species, it is easy to see why these estimates are so high. The UK’s National Audit Office estimated the value of bee pollination in England to be worth £200 million a year in 2007 [3].

Another example comes from the decline in vulture numbers in India leading to their replacement in the food chain by feral dogs.The resultant explosion in the dog’s population led to 48,000 additional deaths linked to rabies, costing the Indian health services an estimated $24 billion in total [4].

This research has helped to put the value of ecosystem services into the language of policymakers and this may help to aid decision making in the future.

For example, Edward Barbier investigated the conversion of mangrove forests in Thailand into shrimp farms. Although doing so has benefitted private shrimp farming companies, much of their profit comes from government subsidies.

In contrast, the estimated public economic value of the mangroves is up to $36,000 per hectare based on direct use of wood and the indirect benefits of coastline protection and offshore fisheries.

When this is combined with the costs of restoring shrimp farms to their original state due to the impacts of salination and agrochemicals, it shows the development of shrimp farms are an uneconomical choice [5] (see Figure 1 below).

Source: Adapted from Barbier (2007) [5]

The problems of value

Putting an economic value on ecosystem services is problematic for a number of reasons. Firstly, this value is only based on human need rather than the intrinsic value of the ecosystem.

The risk is that if the economic gain of an activity is perceived to be greater than the value of the ecosystem services lost to carry out that activity, this calculation could provide justification for the destruction of the biodiversity required to provide those services.

Equally, placing a value on specific species could reduce the importance of maintaining overall biodiversity. It could provide a rationale for one species to be favoured over another regardless of the impact that may have on the balance of the ecosystem.

Source: Jim Toomey [6]

Secondly, economic value changes over time and space. There is a presumption with putting a value on ecosystem services that we know what humans will need in the future and this could be dangerous.

For example, it is fortunate that the Gila monster was given legal protection in the 1950s because its saliva was recently used in the development of diabetes drug Exenatide. Had it not been protected all those years ago, this breakthrough may not have been achieved.

Different cultures value commodities differently so some species are likely to be worth more in some parts of the world than others. Given the global nature of climate change, a common central valuation would be required and this may marginalise the assets held by certain communities.

How has this information been used?

Despite these problems, the idea of giving an economic value to biodiversity has led to schemes designed to incentivise sustainable ecosystem management.

For example, the Native Vegetation Management Framework in the Australian state of Victoria gives landowners credit for maintaining the native vegetation on their holdings [7]. The Mitigation Banking scheme in the US requires developers to preserve, enhance, restore or create wetland areas to offset the impacts of developments on other similar sites [8].

How does this relate to climate change?

Schemes of this type are not really applicable with climate change as its impact on ecosystem services is indirect. Greenhouse gases emitted many years ago are likely to be one of the factors influencing current ecosystem damage.

Quantifying how much an ecosystem service is worth does not automatically quantify exactly how much of that damage was done by climate change.

It is more difficult to implement a system designed to regulate the actions of specific governments, companies or individuals in the same way the landowner-based schemes described above have done. This is because some ecosystems are common resources. No one individual or entity owns the high seas, for example, so it is difficult to determine who should be held responsible for maintaining it.

Ultimately the economic evaluation of ecosystem services is a useful lobbying tool to display its relative importance. At the very least it could help to place biodiversity on an equal footing with health, food production and labour productivity when considered by policymakers.

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